European Commission’s final views on competition in e-commerce – a warning shot on selective distribution?

HomePerspectivesEuropean Commission’s final views on competition in e-commerce – a warning shot on selective distribution?

On 10 May 2017, the European Commission published its final report on its two-year e-commerce sector inquiry (the Final Report). A handy 16-page summary is accompanied by a dense and largely uneventful staff working document running to nearly 300 pages. In summary, the Final Report essentially follows the conclusions (or rather lack of them) in the Commission’s previous preliminary report last autumn, and contains some uncomfortable reading for brand owners.

The Final Report contains some commentary on the use of territorial restrictions, geoblocking, restrictions on resellers’ use of online marketplaces, Google AdWords and price comparison sites, some warnings on resale price maintenance and some analysis of the current regime of licensing of rights to digital platforms like Netflix and Spotify. There are no surprises on these issues, nor any real indications of departures from existing practice. Given that the Commission’s conclusions on these issues in the Final Report largely follow the Commission’s preliminary report, our analysis in our last client alert referred to above also serves to summarise the Commission’s final findings, so we will not repeat it here.

So what has changed, and what are the key takeaways?

First, since the issue of the preliminary report, the Coty case on the legality of banning resellers from using online marketplaces has been heard in the European Court of Justice, but the opinion of the advocates general and judgment of the court are still awaited. As expected, the Commission expressed permissive views in the case (which was a reference from a German court and not brought by the Commission), feeling obliged to follow its own Guidelines on Vertical Restraints, which allow suppliers to impose restrictions on the use of third party platforms by resellers. One does get the feeling, however, that the Commission would quite like the court to disagree and oblige the Commission to change its guidelines. Any movement by the court in that direction should set alarm bells ringing for brand owners.

Also discomforting for brand owners is the restatement in the Final Report of remarks in the interim report to the effect that the Commission may wish to challenge the use of selective distribution structures in sectors or for products where the need for advice or for the sale of products to take place in a specific kind of environment is not, in the Commission’s view, really made out. Again, this marks a step away from previous permissive attitudes to selective distribution, and manifests itself, in particular, in the Commission’s expressed desire in appropriate future cases to challenge the imposition by brand owners of a required minimum quantity of brick and mortar sales where a reseller also sells online.

Other news is that the Commission has launched three follow-on investigations, which presumably are based on material or complaints brought to light during the inquiry. The first case concerns contractual restrictions on online resale pricing of electrical and electronic goods (Asus, Denon & Marantz, Philips and Pioneer); the second, the imposition of geoblocking agreements in relation to the distribution of video games (Valve Corporation, owner of the Steam game distribution platform, and five PC video game publishers: Bandai Namco, Capcom, Focus Home, Koch Media and ZeniMax); and the third, contractual restrictions obliging travel agents to offer different terms for hotel accommodation to customers in different countries (Kuoni, REWE, Thomas Cook, TUI and Meliá Hotels). The word on the street in Brussels is that there are more investigations to come at both the European and national level.

In other closely related areas, the draft regulation on geoblocking, which aims at restricting the right of an online seller to unilaterally block access to buyers from particular countries or to impose discriminatory terms, is progressing through the EU legislative procedure to the trilogue stage of negotiation of the text between the Parliament, Commission and Council, and, finally, agreement has now been reached on a new regulation on the portability of digital audiovisual services which will allow users of platforms (Netflix, HBO Go, Amazon Prime, Mubi, Chili TV, etc.), online TV services (Viasat's Viaplay, Sky's Now TV, Voyo, etc.), music streaming services (Spotify, Deezer, Google Music, etc.) or online game marketplaces (Steam, Origin, etc.) to access their home country content as they travel through the EU.

European regulation of e-commerce will always struggle to keep up with the breakneck pace of change in the sector. Just the same, the Commission continues to slowly chip away at restrictions on the use of e-commerce across the EU, in its continuing desire to perfect and liberalise the European internal market.